Retail & Short-Term Outlook

I came across this Wall Street Journal piece and it is exactly why I ended up shorting the QQQ for the first 10% correction, and have re-entered a short for a short-term play. My belief is the QQQ will end up around $250-252, and then end the year into a strong rally into 2021 as investors digest valuations, Q3 earnings and looking forward to Q4 and beyond.

The article mentions the new wave of investors, as well as new "investors" utilizing options. One person mentioned in the article, “The market has been an emotional roller coaster,” said Temitayo Ola, who is 31 years old and lives in Los Angeles. Mr. Ola got deep into trading stocks back in March. “As someone new to the stock market, I didn’t realize it could hit periods where you have a pullback like this,” he said. This should not be a wake up call, in my opinion. The losses some of these new "investors" are large, and to me seem due to their inexperience in the markets. Time in the market beats market timing. What I started to see and hear was people telling me how much money they are making every day by using options, buying calls on Tesla, Apple, big name brand names. It sort of reminded me of page 39 paragraph 3 of "The Intelligent Investor". I firmly believe anyone who is entering the stock market, with little to no experience, should first buy $10,000-25,000 in an index or mutual fund, I cannot tell you which one because I do not know your risk tolerance. After that sort of investment has been established, maybe slowly nibble and trade and read books to learn. Follow very strategic investors, establish a set of rules and a strong discipline. Emotional disconnect from the stock market is very key in my opinion to generating returns. When the Federal Reserve starts injecting liquidity into the markets, buying corporate bonds, muni bonds, etc. The FED "has your back". The markets tend to go up..from what I have seen. So everyone was feeling super smart, even me! ;) After doing this for 7 years, you start to "feel" the market, seems weird, but there is definitely something there. I like to think my returns have proved something, but I can always do better.

Stock trading has been made very easy to access, and getting approved for options and margin even easier it seems. This worries me, not because of the impact on the total market structure (although that would be interesting to find out the impact..cause I don't know), but because the new investors may/will lose money on options because there are bigger sharks in the sea that will eat you. According to this next article,, 43% of retail investors stated they have used options, margin, or both, this scares me a bit because there is no way most of them fully understand the implications of margin let alone what each Greek stands for (I may write a post on that down the road) or how to price options.

My short-term outlook (on tech at least) is somewhat negative, I believe we will settle somewhere around $250-252 on the QQQ. I believe it is pure technicals breaking down and re-setting, maybe profit taking, not really a fundamental issue although some equity names do seem overvalued in a sense. Not going to name individual names, but I do hope we correct another 6-8% and boggle around for a few weeks with a strong rally into 2021. We can only wish for perfect things right? People want to own technology, software & semiconductors are leaders in my view due to the strong technological advancements we have seen (5G, Big Data, Artificial Intelligence), these may sound like buzzwords that keep popping up, but it is very really stuff that is extremely interesting. I could be completely wrong. These are just my thoughts based on the information I read and see.

Have a great weekend and I will have another post on Monday on my weekend reads. Listed below is my watchlist that I keep track of every day, I do not know everything about ALL of them, but I have a good knowledge base surrounding them.

  1. NET

  2. HD

  3. CTAS

  4. DGRO

  5. IHI

  6. SPX

  7. SMH

  8. SILK

  9. MSFT

  10. QQQ

  11. VEEV

  12. LRCX

  13. IGV

  14. AMZN

  15. CRWD

  16. DKNG

  17. SFIX

  18. SQ

Another read on gambling

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